The truth about Medicaid expansion money

The question of cost has been central in the Medicaid expansion debate here in North Carolina. On this topic, a few claims need to be cleared up.

First, there is the idea that by not expanding Medicaid we are sending North Carolina tax dollars to the federal government which, in turn, sends them to other states which have expanded Medicaid. This mischaracterizes how Medicaid is financed.

The federal government matches Medicaid spending, in the case of the expansion population, 9 dollars for every 1 dollar the state spends. If North Carolina were to expand Medicaid, the 90% federal match would be all new federal spending. Well, new borrowing because of the massive federal deficit.

Second, the claims about the costs to the state have been massively understated. Many have floated the idea that because of the proposed hospital tax, the cost of Medicaid expansion will be “free.” NC Health News gets part of the story, but whiffs on most of it:

Cooper’s budget indicates that adding these new enrollees would require about $2.13 billion in FY 2019-20 and $4.17 billion in FY 2020-21, but most of that eye-popping number would be reimbursed by federal dollars.

“Medicaid expansion requires no State dollars, as the federal government pays 90% of the costs and the rest is paid by hospitals and health plans,” the budget document states.

The price tag for the state would be about $78.2 million over the biennium that would be paid for by assessments [read “taxes”] on hospitals and insurance providers, said Charlie Perusse, Cooper’s budget director.

According to the governor’s budget the costs of Medicaid Expansion are:

By the governor’s calculations, the price tag over the first two years for the entire expansion population would be $6.3 billion. The 10% state share over the biennium would be $630 million. The Governor has appropriated $78.2 million in his budget. That still leaves $551.8 million to be covered by premium taxes on managed Medicaid plans and the new hospital tax.

Just because it is free to the General Fund does not mean it will be free to the citizens of North Carolina. Neither will it be free to our children and grandchildren, the future federal taxpayers who will be responsible for paying for the $22 trillion in federal debt that is a result of reckless spending by the U.S. Congress.

In addition to these real financial costs associated with expanding Medicaid, there are human costs as well, but that’s a topic for a different blog post. We should look for other ways to help those who can’t afford health insurance and work to reform the healthcare system, so it works better for everyone.